Today, U.S. Treasury Secretary Timothy Geithner and President Barack Obama laid out a plan to create and enforce stricter tax regulations for U.S. corporations. Obama's opening salvo from the presser:
Most Americans meet their responsibilities because they understand that it's an obligation of citizenship...and yet, even as most American citizens and businesses meet these responsibilities, there are others who are shirking theirs.
He went on to describe the U.S. tax code as "full of corporate loopholes that [make] it perfectly legal for companies to avoid paying their fair share."
That's right. He was talking about "tax havens": not just countries in which major U.S. corporations hide from U.S. taxes, but a big fat open season sign for fire and brimstone metaphors and sword of Damocles swinging. Democratic speechwriters must adore tax havens. They're like the Newt Gingrich of tax policy: always there to beat up.
Rhetorical fury aside, tax havens really do allow U.S. companies to shore up a whole lot of money, money which Obama hopes to use to revamp the U.S.'s healthcare system, among other things. Interesting factoids from the Treasury release:
- In 2004, the most recent year for which data is available, U.S. multinational corporations paid about $16 billion of U.S. tax on approximately $700 billion of foreign active earnings -- an effective U.S. tax rate of about 2.3 percent
- A January 2009 GAO report found that of the 100 largest U.S. corporations, 83 have subsidiaries in tax havens.
- In the Cayman Islands, one address alone houses 18,857 corporations, very few of which have a physical presence in the islands.
- Nearly one-third of all foreign profits reported by U.S. corporations in 2003 came from just three small, low-tax countries: Bermuda, the Netherlands, and Ireland.
The closing of three major tax haven loopholes should garner $190 billion in tax revenue for the government in the next ten years.
Another big beneficiary of the changes? Lobbyists. Corporate America isn't going to like this -- and they're going to pay a lot of money to see the repeal of these changes.